CVS Caremark Second Quarter Earnings

CVS Caremark (NYSE:CVS) announced its results for the second quarter on August 7, 2012. CVS Caremark provides prescriptions and related health care services and products.

Earnings play an important role in measuring the appropriate valuation for a stock. Investors should be cautious if the company's stock price is high but it consistently has low earnings. SEE: How To Decode A Company's Earnings Reports

The Numbers: CVS Caremark beat expectations with its latest EPS and revenue figures. The company reported adjusted net income of 81 cents per share versus the 79 cents per share estimate and revenues of $30.7 billion versus the $30.31 billion estimate. Revenue climbed 15.3% from the same period last year. CVS Caremark has averaged revenue growth of 14.2% over the past five quarters. CVS Caremark's net income for the second quarter was $966 million, a 18.4% increase from last year. Last quarter marked the third in a row of rising net income.



A Look Back: Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 1.4 percentage points to 17.7% from the year-earlier quarter. Over that time, margins have contracted on average 1.8 percentage points per quarter on a year-over-year basis.

Net income has increased 7.5% year-over-year on average across the last five quarters. The biggest gain came in the most recent quarter, when income climbed 18.4% from the year-earlier quarter.



Looking Ahead: Analysts are pessimistic about the company's results for the next quarter. The average estimate has fallen for the third quarter to 83 cents per share, down from 84 cents seven days ago. A decreasing earning estimate is a negative sign and usually leads to a drop in the stock price. Over the past three months, the average estimate for the fiscal year has climbed from $3.27 per to share to $3.29.